What Warren Buffett Reads Before the P&L (and Why You Should Too)

▶ Know exactly where your business finances stand - get your cash cushion and Cash Risk Rating free in under a minute: https://ownyournumbers.app/ 🏅 Own Your Numbers is featured in @xero's New and Noteworthy apps collection throughout September: https://apps.xero.com/uk/app/own-your... 💷 New to Xero? 90% off for 6 months with our partner link: https://referrals.xero.com/az4qngw8v0mf (affiliate link: Xero credits us if you subscribe, no extra cost to you) Warren Buffett spends far more time on balance sheets than on income statements, because a balance sheet is much harder to manipulate. In this walkthrough Ciaran O'Donnell builds a simple one in a spreadsheet and shows what an investor actually reads off it: how the business manages cash, whether the bookkeeping is complete, and whether the owner is making decisions the cash can afford. Then the number the balance sheet cannot show you on its own. Net cash of £81,600 against a monthly cost base of £37,500 is a cash cushion of 2.2 months. Grow it to £125,000 and the business moves from medium risk to low. Let it fall to zero and any slow month becomes a crisis. Two rules from the film worth writing down. Only trust your P&L with a clean balance sheet. And net reserves are not an invitation to empty the company. 🕐 Chapters 0:00 Buffett reads the balance sheet first 0:35 A simple balance sheet, built from scratch 1:54 Why investors obsess over it 3:11 Three things a balance sheet exposes 4:00 Where profit actually sits 4:15 Net cash and the current ratio 5:11 Net reserves are not a dividend pot 6:24 Only trust your P&L with a clean balance sheet 6:37 Cash cushion, the number one number 8:30 From medium risk to low risk 9:50 What is your cushion? 10:21 Two clicks from Xero 🔑 Key takeaway: cash cushion = net cash ÷ monthly cost base. The balance sheet gives you net cash; add your cost base and you have the one number that says how close to the cliff edge you are. Built by Ciaran O'Donnell - Finance Director and CFO of the Year. 🧾 Find us on the Xero App Store: https://apps.xero.com/uk/app/own-your... 🌐 More: https://www.ownyournumbers.com/ #OwnYourNumbers #BalanceSheet #CashCushion #CashFlow #FounderFinance #Xero